Should next yrs A/P be in current liabilities even though this years expenses are accounted for in cashflow?
Answer:
I would need a little more info to give an accurate answer, but I would say yes with what is given.
A current liability is anything that is owed at the date of the balance and it will come due(be paid) within 1 year of the balance sheet date. The expenses for the liabilites should be recorded and included. The entry made is:
(Debit)Expense....$xx
.....(Credit) A/P.....$xx
Expenses are used when calculating profit and loss (EBIT), Liabilities are on the balance sheet (L+E=A). Liabilites can be either short term (current), which means debts due within a year, or long term (notes or loans with repayment terms over one year).
If you have a loan where you are making monthly payments for five years, the payments for the current year are considered a current liability, the balance of the loan is long term.
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